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Apple Must Respect Qualcomm’s IP Integrity

This article was originally published on July 27, 2017 in Forbes.

In today’s high-tech world, awash with freemium services and open source software, it’s easy to forget the significance of intellectual property (IP) rights in the development of the technologies we enjoy every day. IP rights do much more than simply protect the assets of companies that own patents – they drive economic growth, especially job growth in high-paying sectors. IP assurances also foster competition, which spurs innovation and encourages businesses to dedicate their resources toward solving the world’s greatest challenges.

Consumers are the direct beneficiaries of this kind of invention and innovation. IP rights also protect consumers by ensuring authenticity and enabling them to make informed choices about the quality and safety of the goods and services they purchase.

Conversely, when IP rights come under attack, as they have been at an alarming rate in recent years, investors move their money to markets that are less IP-intensive, reducing the available resources for tech research and development. It is consumers who suffer the most when incentives to develop IP are all but eliminated. In the short run, they may see steady or lower prices, but in the long run consumers lose out on remarkable advancements that improve the quality of their lives.

A lesson in the importance of IP rights is currently playing out in a high-stakes conflict between two tech giants. Chip manufacturer Qualcomm is in a long-running legal tussle with smartphone giant Apple. Apple accuses Qualcomm of overcharging for the technology Apple uses in some iPhones, and has accused Qualcomm of noncompetitive licensing. Qualcomm, meanwhile, asserts that Apple offered it an unrealistically low price to license its patents.

Why should consumers care about this legal dispute?

Apple has placed consumers directly in the middle of its dispute with Qualcomm by apparently impeding the speed of Qualcomm’s chips. Verizon iPhone 7s use Qualcomm chips, whereas iPhone 7s sold through AT&T use Intel chips. Not all chips are created equal, and the Qualcomm chips used in the Verizon models were technically capable of delivering data much faster than the Intel chips. However, independent testing found that the speed of both phones performed close despite their differing capabilities. The Verizon version outfitted with Qualcomm technology is still faster, Bloomberg reports, “but not as fast as it could be,” indicating that Apple impeded the baseband processors used in the iPhone 7 models sold to Verizon customers, effectively depriving customers of the superior abilities of Qualcomm technology. Apple has not officially commented on this allegation – in fact, ZDNet has reported that Apple threatened Qualcomm not to disclose that it had slowed its technology.

Apple will not comment on the record about its reasoning for the practice or even that it occurred, but it’s not unreasonable to conclude that Apple slowed Qualcomm’s chips, as some say, to “level the playing field” among its suppliers to cut its costs. But this means denying consumers’ access to faster speeds and Qualcomm its earned advantage over its chief competitor. It’s like forcing LeBron James to play in moon shoes so you can lowball him on his next contract. Cavs fans wouldn’t tolerate the imposed handicap, just as consumers shouldn’t tolerate Apple’s degradation of Qualcomm chips.

Some speculate that Apple simply wants all the iPhone 7s it sells to perform the same, citing that inconsistent performance would frustrate customers and hurt iPhone sales through AT&T, and therefore Apple’s relationship with the telecom power. In the process, however, the company seeks to deprive Qualcomm of its financial incentive for creating a superior chip – and essentially reward Intel for an inferior product.

Furthermore, Verizon customers are having their phones unfairly slowed down while AT&T customers are unaffected. If consumers pay for a more technically capable product, shouldn’t they be able to take full advantage of that product, regardless of which carrier they go through to buy their iPhone? Apple may have the legal right to do this, but that doesn’t mean it’s a good way to treat its customers. More importantly, Apple does not have the right to mislead their customers about it – as they did when they publicly said there was “no discernible difference” between the speeds of phones that had the Qualcomm vs. the Intel modems.

The best outcome for consumers is for the two companies to reach an amicable compromise and settle their lawsuit. A long, drawn-out legal battle will only end up costing consumers more and could potentially disrupt the supply of iPhones. There is precedent for such a settlement: in 2014, Microsoft sued Samsung in a patent dispute, but the two entities reached a settlement for an undisclosed amount and maintain a healthy business partnership today.

This royalty dispute could have important consequences. Simply put, IP matters. When companies make investments in long-term R&D, those investments must pay off – otherwise, they won’t be able to invest in future innovation. That means inferior products available for consumers.

Apple should be open about the differing capabilities of its smartphones and consumers should be able to use the full power of their devices. Why not give consumers what they pay for, especially given the high prices of Apple’s in-demand smartphones and mobile devices?

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